The Monday note - 15 May 2017

• The FTSE 100 closed on Friday at 7,435.4, up nearly 134 points on a week earlier and marking a record high, as investors greeted the election of President Macron in France. Ten year Gilt yields stood at 1.10%.  
• President Xi of China pledged an additional $124 billion of investment in the ‘Belt and Road’ infrastructure initiative. This is a plan to build transport links to support trade between China and its key markets for exports and commodities. 
• The pound finished the week just short of US$1.29, making it the strongest performing of the G10 currencies in 2017 so far. At the start of this year, sterling was trading at around US$1.23. 
• Japan’s Softbank made its second major UK tech sector investment in the last year, ploughing $502 million into London-based virtual reality start-up, Improbable. 

Chief Economist comments: 

Centrist politics is making a comeback. Following President Macron’s victory over Marine Le Pen, Angela Merkel’s CDU in Germany has achieved a surprise win in the North Rhine Westphalia state election; as the SPD’s new leftist leader failed to win over voters in a very industrial region. The drift back to politics as usual will normalise the business environment, and investors may decide that now is the time to deploy money while assets still have political risk (whether it be Brexit or populists) priced in. The recent uptick for the pound shows how quickly that risk discount can start to disappear.